After treading water for much of the session, Treasuries got a late-day lift from the collapse in stock prices, which is seen as easing the pressure on the Fed to hike interest rates.

Earlier, most of the price action in the bond market was in agency securities, which briefly went way down in price relative to Treasuries after

Dow Jones

reported on critical comments by Fed Chairman

Alan Greenspan.

There was no major economic news, as the benchmark 10-year Treausury note gained 5/32 to 100 16/32, trimming its yield 2.2 basis points to 6.428%. Shorter-maturity issues outperformed, as they typically do in rallies driven by the stock market. The two-year Treasury gained 3/32 to 99 8/32, dropping its yield 5.2 basis points to 6.792%.

The 30-year Treasury bond gained 11/32 to 101 6/32, lowering its yield 2.8 basis points to 6.163%. At the

Chicago Board of Trade

, where the session ended at 3 p.m. EDT, before stocks went into a tailspin, the June

Treasury futures contract ended down 1/32 at 93 30/32.

The action was strongly reminiscent of

yesterday's, when the early collapse in stock prices ignited Treasuries.

There sure isn't much else to ignite Treasuries this week. The only major economic release, April

durable goods orders

, comes out on Friday, when the bond market will close early ahead of the holiday weekend. Tomorrow will bring an announcement of the details of the next Treasury buyback, on Thursday. But barring a surprise there,

Lehman Brothers

Treasury market strategist Doug Johnston said, "I think guys are just parked in neutral, waiting for another signal."

But, if the Treasury market is acting predictably, rallying when stocks take a tumble, it's not necessarily acting sensibly, according to Kevin McKenna, head of taxable money market funds for

Merrill Lynch Asset Management

. "Stocks are really following the Fed," he said. "As long as the feeling is that the Fed's in play, higher interest rates are going to make it difficult for stocks to do better." On occasion, falling stock prices may trigger a flight-to-quality run-up in Treasury prices, but McKenna said those are "opportunities to lighten up. It's hard to surrender a fundamental opinion to a flight-to-quality trade."

By the same token, McKenna thinks that Treasury market participants are so uniformly pessimistic about the Fed outlook -- with almost everyone expecting that the

fed funds rate will rise to 7.5% by the end of next year's first quarter -- that the first signs of an economic slowdown could trigger a big rally. "Because no one likes the market, any news that prompts anyone to buy is going to feed on itself," he said.

Meanwhile, Greenspan's comments on agency securities, in a letter to Rep.

Richard Baker

, R-La., caused agency yields to rise 4 to 5 basis points relative to Treasury yields overnight, said John Atkins, market analyst for

IDEAglobal.com

. But institutional investors were quick to take advantage of the sudden cheapness, and the spreads soon narrowed back, Atkins said.

Greenspan said he agreed that the low borrowing costs enjoyed by federal agency borrowers reflect investor perception that the government would not allow the agencies to fail. Baker has sponsored a bill that would reinforce the agencies' independence by removing their never-used federal lines of credit. The bill is not expected to pass this year, and Greenspan's remarks don't greatly alter its fortunes. But they temporarily unsettled a market that is highly sensitive to headlines on the Baker bill.

Agency securities are bonds and notes issued by government-sponsored enterprises, or GSEs, including

Fannie Mae

(FNM)

,

Freddie Mac

(FRE)

and the

Federal Home Loan Bank

.

Economic Indicators

The two weekly chain-store sales reports were mixed. The

BTM Weekly U.S. Retail Chain Store Sales Index rose 0.6%, lifting the year-on-year growth rate to 4.6% from 2.0%. The

Redbook Retail Average found May sales running 0.1% behind April after three weeks.

Currency and Commodities

The dollar fell against the yen and the euro. It lately was worth 106.42 yen, down from 107.13. The euro was worth $0.9073, up from $0.9027. For more on currencies, please take a look at

TSC's

Currencies column.

Crude oil for July delivery at the

New York Mercantile Exchange

rose to $28.78 a barrel from $28.73.

The

Bridge Commodity Research Bureau Index

fell to 223.66 from 223.83.

Gold for June delivery at the

Comex

fell to $274.70 from $276.20.